Kossan’s 3Q revenue surges by 34.5% y-o-y

by **Cals** Mon 23 Nov 2015, 22:10

Kossan’s 3Q revenue surges by 34.5% y-o-y

By MIDF Research / The Edge Financial Daily | November 23, 2015 : 10:31 AM MYT

This article first appeared in The Edge Financial Daily, on November 23, 2015.

[size=16]Kossan Rubber Industries Bhd ([You must be registered and logged in to see this image.] Valuation: 1.10, Fundamental: 2.10)
(Nov 20, RM8.90)
Maintain neutral with an unchanged target price of RM7.84: Kossan Rubber Industries’ net profit for the third quarter ended Sept 30, 2015 (3QFY15) surged by 60.4% year-on-year (y-o-y) to RM55.2 million.

The company’s cumulative nine months period ended Sept 30, 2015 (9MFY15) net profit of RM148 million accounted for 74.1% and 71.7% of ours and consensus full-year earnings estimates respectively.

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The group’s 3QFY15 revenue surged by 34.5% y-o-y to RM441.7 million due to higher sales volume, which increased by 33% quarter-on-quarter (q-o-q). However, the revenue growth was slightly offset by lower average selling prices of gloves, which decreased by approximately 12% q-o-q due to lower natural rubber and nitrile butadiene rubber prices.

The production mix of Kossan has also improved with more focus on nitrile gloves. The production mix of nitrile to latex in the 9MFY15 was 68:32. In comparison, 9MFY14 nitrile to latex mix was 60:40.

Kossan’s 3QFY15 earnings grew 60.4% y-o-y to RM55.2 million. The increase in earnings was mainly due to better operating efficiency. Its profit margins also improved, expanding by two percentage points year-over-year.

Both of Kossan’s new plants, namely Plant 2 and Plant 3, are up and running and started contributing to the group’s revenue since June 2015. Currently the group is operating at 22 billion pieces of gloves per annum with a utilisation rate of more than 80%.

By end-2015, the group expects to achieve a product mix of nitrile to latex gloves of 70:30. No change in forecasts. We make no changes to our earnings forecasts at this juncture pending an analyst briefing scheduled for later. —MIDF Research, Nov 20
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